Using a credit card is not rocket science, but unfortunately, especially for first time card holders the card does not come with an instruction manual. Confused card holders that are unaware of policies are often the card holders that end up in debt with high interest rates, balances that have been carried from month to month and the fees associated with late payments and the card holder allowing the balance to exceed the credit limit that has been granted. Simple credit card “rules” could prevent these credit mistakes that could leave you in debt and cost you the good credit rating that the card holder has worked so hard for.
Don’t Carry a Balance
Carrying a balance can cost the card holder money each month in convenience fees referred to as interest. The monthly payment will often increase if there has been a balance on the card and are accounted as the cost of using money that isn’t yours! Many consumers are unaware that repaying the credit card up to twenty days later means that the purchases were repaid within the grace period of the credit card and therefore are not subject to interest fees. However, the card must be balance free from to month to save money this way.
Pay at Least the Minimum Payment… Pay More if You Can
Missing the minimum payment on the credit card can cost you more than high levels monthly payment and fees for missing the payment. It can cost you the good interest rate that you have been granted. Once a payment is missed on the credit card the credit card company can raise your interest rate, as you have begun to show risky payment behavior! If you are carrying a balance, your monthly payment can increase as much as ten percent.
Paying the minimum monthly payment to a credit card that is at its limit could take up to ten times longer to repay than paying double, or even triple the monthly payment. These minimum payments are designed to repay interest, with a tiny portion of the balance. Paying only the minimum payment is a great way to get into debt, and stay there.
Watch out For Fees
When using a credit card, it is important to remember that they are often one of the highest costing financial services that are available to consumers. There are many fees associated with the card including over limit fees, late payment fees, foreign transfer exchange fees, balance transfer fees and even annual fees that allow for use of the credit card. Watch these fees and you can save hundreds of dollars per month throughout the lifetime use of the credit card.
Using these tips, you should be able to use the credit card wisely and reduce the chances that you could be facing credit card debt in the future. Be sure to use the card wisely and purchase only what you can afford to repay – any other behavior is ultimately going to lead to debt.